The Pension Fund Regulatory and Development Authority (PFRDA) Bill, 2011 was on Wednesday approved by the Lok Sabha. The UPA government said that the bill provides several investment options to the subscribers and builds confidence in them as the bill is based on the principle “you save while you earn.”
The bill provides for 26 per cent foreign investment in pension sector or as may be approved for insurance sector, whichever is higher. It also provides that at least one of the pension fund managers shall be from the public sector.
Union finance minister P. Chidambaram, while replying to the debate said that the government has accepted most of the recommendations of the standing committee. He said it would be beneficial for those who have a regular income and that they can save for their future namely retirement period.
The bill was referred twice to the standing committee in 2005 and 2011.
The point related to re-payable advance was not accepted by the government as it believed that it will convert the account into an over draft account.
The bill will have provisions that for withdrawals for limited purposes from Tier-I pension account, an incentive for subscribers to join the New Pension Scheme (NPS). It seeks to empower PFRDA to regulate the NPS.
The bill also grants statutory status to the Pension Fund Regulatory and Development Authority with powers to penalise. The corpus of the NPS having 52.83 lakh subscribers (including those of 26 state governments) was about `35,000 crore.
“`35,000 crore should not be used by unstatutory authority...All this bill does is make unstatutory authority (into) a statutory authority”, said the finance minister.
The bill also provides an array of choices to the subscribers like opting for government bonds as well as in other funds depending on their capacity to take risk. Also the subscriber seeking minimum assured returns would be allowed to opt for investing funds in such scheme providing minimum assured returns as may be notified by the Authority.
The NPS has been made mandatory for all the central government employees (except armed forces).